China to suspend all trading when stock markets volatile

If the CSI 300 index of 300 major listed companies rises or falls five per cent, authorities will suspend trading on both the Shanghai and Shenzhen exchanges for 30 minutes.
If the CSI 300 index of 300 major listed companies rises or falls five per cent, authorities will suspend trading on both the Shanghai and Shenzhen exchanges for 30 minutes.PHOTO: EPA

SHANGHAI (AFP) - China plans to halt all trading on its stock markets if they move five per cent or more, according to a statement from the country's two exchanges, as authorities seek to control a rout.

If the CSI 300 index of 300 major listed companies rises or falls five per cent, authorities will suspend trading on both the Shanghai and Shenzhen exchanges for 30 minutes, the bourses' statement said.

But if the index - which includes companies such as banking giant ICBC and energy majors PetroChina and Sinopec - gains or rises seven per cent, trading will be stopped for the rest of the day, it said.

The mechanism - dubbed a "circuit breaker" - will "prevent market risks" and foster the "long-term stability and healthy development of the securities market", the statement late Monday said.

The move is the latest step taken by officials as they try to control the bursting of a bubble that has seen the benchmark Shanghai Composite Index slump by around 40 per cent since mid-June, having risen more than 150 per cent in the previous 12 months.

After the rout, China launched an extraordinary package of measures to prop up stock prices, including funding a state-backed company to buy shares, in policies widely criticised as counter to pledged market reforms.

Investment bank Goldman Sachs estimates the Chinese government has spent 1.5 trillion yuan (S$333.7 billion) to support its stock market over the last three months, Bloomberg News reported.

The introduction of the circuit breaker has already been approved by the market watchdog, the China Securities Regulatory Commission, though the exchanges said they were still seeking public opinion about the move until September 21. They did not give a start date for the policy.

Under current rules, individual shares can already move no more than 10 per cent up or down.

In a separate move, the finance ministry said Monday that China will offer investors who hold shares for more than a year relief from a 20 per cent dividend tax, with those holding for more than a month only having to pay half the tax.